Another intriguing week passes us by, with global events and news taking centre stage as the Rand melted weaker and weaker...

It has been an incredible turn of 'fortune' for the ZAR, which has left many economists even more stumped - they didn't understand why the Rand strengthened towards R16.30, and now they are befuddled as to why it has suddenly crashed into the high R17s...

The key thing to understand is this:

Economic, political and social events are mostly noise (and sometimes triggers) and a source of information for economists to blame for market moves ... after the fact.

But that doesn't really help anyone, when it is too late, does it?

The fact is, you do not need to know what events are coming - what you need to know is what the market itself is telling you as to where it is likely to head next, based on past sentiment patterns and cycles.

This allows you to make decisions and take action - at the right time!

Once you understand that, you will look at the market in a different light.

This week's review will provide a classic example of this.

So let's get into the full review to show how we saw this all playing out...

So, before we hit the road running into the week, we had already released a forecast at the market close on Friday. The Rand sat at R17.07 to the Dollar, after having already weakened 70c during the days prior.

At this point, the outlook was for the Rand to weaken even higher, to test upwards of R17.20, and possibly R17.70… (see below the forecast - click to enlarge)

It was certainly going to be an interesting few days!

And here were some of the biggest events as the global outlook took centre stage:

  • China/US tensions - the continued rise of animosity and decoupling between the two nations continued, as the US took action on Chinese social media apps, stirring the Chinese Communist Party's nest some more...
  • Gold price soars - the precious metal ballooned to all time highs over $2000 as global tensions and worries continued to rise...
  • Beirut explosion - Lebanon was rocked by an enormous explosion at it's port, leaving hundreds of thousands homeless as well as many injured and killed.
  • Economic data - jobless claims, interest rate decisions, and Nonfarm Payrolls were all on the cards to come out over the 5 days.

So, right from the start of the week, the ZAR was on the back foot - and based on our forecasts, this was expected to continue.

The markets were greeted with Trump suggesting a possible delay in the November election, as a result of all the trouble the virus has caused, and the uncertainty around the accuracy of mail-in voting...

One thing is sure - the US election is going to be a massive market trigger as we head into the final 3 months before D-day...

Also in the US was the rising animosity between itself and China - or more accurately, the Chinese Communist Party, with the two are a far cry from where they were when the Trade deal was signed just before the pandemic became public.

Its been brewing for a few weeks now, but finally on Thursday an order was signed to ban the Chinese social media app, TikTok, drawing criticism and anger from the Chinese Communist Party. This has clearly been a systematic targeting of the Communist regime from the US that has been going on for the last few months in retaliation to the pandemic which started there - but all the actions so far have certainly been for the best and have been justifiable.

What this means for the markets is more what effect it is going to have on the trade deal, as the two nations have agreed to meet and discuss the deal during the course of this coming week - who knows what will follow...

It also seems the start of a tariff war between Canada and the US is starting to brew, with Canada in retaliation imposing tariffs on $2.7bn in US goods...

So as all of this played out, the Rand continued to zig-zag its way weaker against the Dollar, breaking clear into the target area, exactly as per our forecast from Friday.

Our Elliott Wave based forecasting system had called it again, as we saw the USDZAR break now almost 140c from its strongest level just a few weeks ago!

And then in other news:

  • We had Gold breaking to all-time highs, hitting more than $100 over its previous high back in 2011, touching as high as $2075 per ounce! It has been an interesting few months for 'alternative to fiat' currencies such as Gold and Bitcoin, as both have seen significant rises in value. JP Morgan indicated that "Older investors go for gold, younger ones bitcoin"

    The next few months of our forecasts on our Global Predictions on these markets are going to be interesting to watch - click here for more info on those

  • Disaster struck in Lebanon as 2750 tons of ammonium nitrate exploded in their port, blowing the surrounding area to smithereens. Horrifying videos of the shockwaves blasting back into houses and buildings, as well as reports of tremors being felt 250kms away in Cyprus proved the almost nuclear bomb-like power of the explosion. The story seems to lead back to a Russian ship which had the ammonium nitrate onboard which was confiscated and sitting in a warehouse as a disaster waiting to happen…which did happen! The Lebanese government has some difficult questions to answer for the loss of life and property.
  • On the economic data front - we saw BoE vote to keep interest rates stable at 0.1%, but negative rates were not impossible in the future as a longer recovery from the virus is very likely. In the US, there was another 1.2 million jobless claims, as for the 20th straight week there were 1m+ claims - despite this, the payroll count increased by 1.8 million, and the unemployment rate has fallen back to 10.2%.
  • Locally, the Eskom and SAA sagas continued to play out, with all the Gupta worms coming out the woodwork on Eskom, and the SAA rescue process seemingly in a gridlock, with no sign of funding being made available. These two will unfortunately continue to dominate headlines.
  • Back to the Rand, we saw the local currency spiral its way up to touch as high as R17.68, and some resistance seeming to form there with 3 failed breaks of 17.70 through Thursday and Friday.

    This was in line with the next forecast which we had released on Wednesday, showing that we expected the Rand to make another stab higher into the 17.64-18.02 area before we would then see it topping out (in the short term). Take a look at our forecast below, and click to enlarge it:

    What had been quite a week, eventually came to a close with the USDZAR closing around R17.58/$...and pushing a few cents higher after the SA close

    The Week Ahead (10-14 August 2020)

    As we look to the week ahead, we have several important events coming up over the next few days:

    • SA - Unemployment rate, Manufacturing production, Retail sales
    • USA - Initial jobless claims
    • UK & EU - GDP figures

    Some of the more interesting ones are certainly going to be the unemployment figures locally as well as the GDP figures from the UK & EU.

    And not to forget the ongoing stimulus situation in the US, which stalled badly through this last week.

    So, with all these events, where will this leave the Rand?

    The Rand has taken a pounding the past 2 weeks, and while it is looking toppish short-term, market volatility is unlikely to subside.

    When the market is highly volatile, it is extremely difficult to make rational and educated decisions that often mean doing the opposite of what your emotions are telling you.

    And that is why we continue to rely on our Elliott Wave based forecasting system to give us a scientific-based objective view of where the market is likely headed in time and price.

    Last week no doubt caught many surprise -

    I sincerely do trust that YOU were not one of them...

    ...because this week is not likely to be any different!

    We are watching 2 key levels the next couple of weeks, which will confirm our longer term wave counts.

    Click here now to start your free trial

    (You don't want to regret not having done so this time next week...)

    Look forward to hearing from you.

    To your success~

    James Paynter

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